The Features of Equity Capital Increases by Italian Corporates

The economic losses inflicted by the pandemic shock caused severe capital shortfalls for many corporates, which led to public measures being adopted to support firms’ recapitalization and the rebalancing of their financial structure. However, evidence about the dynamics and features of these capital increases is scarce. Our work attempts to fill this gap by studying capital increases by Italian non-financial corporations between 2008 and 2020. Stylized facts and insights on the economics of capital increases are provided and the implications for the design of public support programs are discussed. We found that, first, small firms are less likely to raise new equity funds than larger firms; second, capital increases by large and financially vulnerable firms produce countercyclical behaviour, as the amount of these increases rises during downturns; and third, financially sound firms use new capital mostly to finance investments, which in turn expands their sales, while fragile firms tend to rebalance their financial structure with positive outcomes for their likelihood of survival